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Should We Save Dying Companies? (Part II)

By

Gary Hamel

Jul 20, 2009 11:39 am ET

At the end of my last post I posed a couple of questions: In a dynamic economy, is there any reason to care whether a particular company lives or dies? Or to put it another way, does organizational longevity have any intrinsic value—for shareholders, employees, customers or society at large?

If you’re a venture capitalist, a classically trained economist or an emotional zombie, you’re likely to answer “no.” I get that. In a market economy there are several mechanisms that make it difficult for a company to persistently misuse society’s resources. Highly competitive product markets, a healthy entrepreneurial sector, a market for corporate control and the threat of bankruptcy — these are the things that protect customers and shareholders from unremitting managerial incompetence. When these insurance policies are in place, a corporation that fails to adapt to changing circumstances will loose its customers, its best employees, and ultimately, its independence. That’s what happened to Sun Microsystems, the once-revolutionary company that recently ceded its sovereignty to Oracle. Given this, it doesn’t matter whether an individual company is resilient, it matters only that the economy is. This view has the benefit of being neat and simple, but on several counts it’s also simple-minded.